Risks

Shortcap lists perps on thin, young tokens. These are the risks that come with it.

Index manipulation on thin pools

The index comes from a spot pool. A thin pool can be pushed with a large swap.

Mitigations: the index is a 5-minute TWAP, so a short push moves it a little. It is clamped to ±15% of spot. Open interest per side is capped at 20% of the pool's liquidity, so the market is never much larger than the pool. A move of more than 30% from the TWAP freezes the market. P&L is measured on the vAMM, which a spot swap does not move.

These limits reduce the profit of a manipulation. They do not make it impossible.

Pit drawdown

The Pit takes the other side of every trade. When traders are right and on the same side, the Pit pays.

Mitigations: the 5x leverage cap, the open-interest caps per side, and a per-market insurance fund. Depositors should expect drawdowns during one-sided trends.

Liquidation

These are perpetual contracts. A leveraged position can be fully liquidated. At 5x, a price move of about 16% against you uses 80% of your margin and makes the position liquidatable. You can lose all the margin you post.

Testnet software

The contracts are unaudited. They run on the Elysium testnet with mock tokens and mock pools. Treat every number as a test.